Googles Postini Buy Threatens Microsoft

Analysis: Google is making aggressive moves into the enterprise market and revving up for a battle with Microsoft Exchange.

Googles July 9 acquisition of Postini is another clear sign that the search giant is staking a claim in the on-demand enterprise applications market and ratcheting up the heat in the already sizzling software as a service sector, especially against Microsoft.
With Postini, which began as an e-mail filtering company and evolved into compliance technology that enforces a companys communications policies, Google can now address the perception that its nascent portfolio of e-mail and messaging applications arent quite ready for prime time.

Whats more, Google can take advantage of Postinis huge customer base35,000 customers and 10 million usersto become a contender in the desktop applications market where Microsoft lives.

"Basically this is [Google] throwing the gauntlet down to Microsoft and saying we intend to compete with you in your core market," said Shar Van-Boskirk, an analyst with Forrester Research. "And if thats the case we will see Google compete with Microsofts broader set of back office applications."
The question is whether Googles $625 million acquisition of Postini will make enterprise IT buyers feel secure enough to adopt Google applications?
Theres no question that Googles business-level hosted applications, known as Google Apps, are gaining traction. Dave Girouard, vice president and general manager of Googles Enterprise division, said that more than 1,000 small businesses download Google Apps daily, as have hundreds of universities.
But Girouard also conceded that security concerns have prevented larger companies from adopting Googles applications. According to Girourad, companies need "brain dead easy" technology that has native archiving, compliance and legal discovery capabilities.
In this context the Postini acquisition, which has been rumored for at least a month, makes sense.
"Why Postini?" Girouard asked during a July 9 press conference discussing the deal. "Google has always been very focused on the end-user experience, one that is simple and intuitive. But security and compliance are a must in bigger business. Thats what Google wants to take advantage of. We are fundamentally here today because its a business we believe we should be in. It will accelerate software as a service."
Postini, founded in 1999, provides three separate suites: Communication security (e-mail, Web, IM); communications compliance (archiving, encryption, Web compliance); and e-mail security.
The software is available on a multitenant architected platform designed for enterprise-wide deployments, according to Scott Petry, founder, chief technology officer and executive vice president of product development at Postini.
Click here to read more about Googles shift to the enterprise.
"We deliver multiple applications [that] service customers across security and compliance," said Petry during the July 9 call. "Importantly, we have a platform to configure our application set that lets us configure to the customers needs. Customers get the power of the Internet as a computing platform and a suite of applications that is centrally managed and provisioned."
So while Google gets an on-demand platform for delivering secure communication functionality, Postini clearly gains from having a global reach. "Scale has to be our deal as well," said Petry. "This allows us to build our application sets to meet the needs of each [customer]."
Prior to the Postini acquisition Google tried to address messaging security, but it was something the company did through partnershipsan approach that is clearly not working for the enterprise set.
"We have been focusing on partnerships but asking customers to pull [functionality] together themselves," said Girouard. "Its really in our interest to do that for them."
Postinis secure email and messaging puts Google in a good position to compete against the likes of Microsoft (Exchange), IBM (Lotus Notes), Novell (Group Wise) and newer entrants to the online e-mail and messaging market place like Hotmail, Yahoo Mail and AOL.
"Postini is a key provider of mail and instant messaging security providers. The difference in where this acquisition makes a great opportunity [for Google] is Postini has a broad customer base," said Rebecca Whettemann, an analyst with Nucleus Research. "It shows that Google is continuing to look at the enterprise space as growth for them. Its a much stronger message."
Whettemann said that what Google is really looking to do with the Postini acquisition is slip into the enterprise market dominated by Microsoft Exchangea product thats been a runaway success since Microsoft introduced it a decade ago.
"[With Postini] well see organizations consider Google Apps," said Whettemann. "Particularly those that question how much of the Microsoft suite they want to use. E-mail is an ideal [entry point]."
Forresters VanBoskirk agrees that more secure messaging and e-mail applications will present a better in for Google in enterprise dealswith entry being the key word.
"Thats a big shift for enterprise businesses to shift from a Microsoft shop to any other. Were talking years for Microsoft to be threatened significantly," said VanBoskirk. "Do I think this is going to make enterprises drop their enterprise applications? No. But it will introduce a new set of tools and [companies] can decide if theyre better or faster two years down the road."
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